Overheads

From the Resene Trade blog - Resene Professional development programme

These are the costs used to run your business that are separated from the costs of the function of painting (paint and accessories) and are recovered (hopefully) by including an average for the overheads in prices you give customers for work.

In some regards overheads can be included, for example – a painter’s hourly rate for charging up will include overheads which are in the order of one third of the total cost of labour.

Similarly, the build up dollar rates for painting ‘Average rates for painting’ also include an overhead allowance, and a modest profit.

Quite often the total of overheads, particularly with smaller businesses, is rather more than the total costs of materials used by the business, and in fact the overheads, as a percentage of productivity tends to be highest when the firm is smallest and of course the percentage decreases as the productivity base widens – a self employed painter running a business painting needs all the items listed and economies of scale would suggest that mostly they will need for example a van and a phone, so too could another painter employing four people – and the same cost would be spread over the earning efforts of five people.

It is a commonly expressed statement that painting is so much more fun working away by oneself, but these people need to be right at the high end with their prices to properly pay for everything.

Very often painters can judge the time and materials needed for a job well enough and tend therefore to produce quotes that cover the ‘time and materials’ but overlook the standing overhead costs.

Pretty well in every town there are two broad groups of painters with their average prices and the lower group consistently undervalues the costs of painting as a business while the others get it right. This despite the assertion from both groups that our industry is ultra price sensitive.

A typical set of overheads would be:

1. Accountancy fees – usually more than expected.
2. Advertising – word of mouth is best, but chances are you may need to supplement it with some other advertising.
3. Bank fees – nibble away at all of us.
4. Directors’ fees – partners and sweethearts.
5. Entertainment – staff shouts and Xmas etc.
6. General expenses – often interesting.
7. Plant and equipment hire – more particularly establishment costs.
8. (Home) Office/workshop – legitimate expense.
9. Insurances – you’ll need this for when trouble strikes.
10. Interest (bank) – sometimes you need some finance.
11. Interest (H.P.) – vans and spray equipment and computers.
12. Legal costs – best avoided!
13. Postage and stationery – quite a lot on an annual basis.
14. Repairs and maintenance – these are running costs of machinery and plant.
15. Subscriptions – Master Painters etc.
16. Telephone/email/mobiles – heaps – Radio GooGoo Radio GaGa.
17. Vehicle expenses – always more than you imagine.
18. Depreciation – setting aside a % of replacement.

All these costs are paid for from what you earn painting, so make sure you put these costs in your quotes.

July 2017